2021 Boston Mayoral Race

[lexicon506]

This woman has literally 0 economic sense and this is just one way Boston is going to suffer over the next few years.

The arrogance to actually think you're smarter than Mayor Wu because what.. you post on the internet a lot? And she's a woman? Grow up if you want people to take you seriously.

 

[DZH22]

The arrogance to actually think you're smarter than Mayor Wu because what.. you post on the internet a lot? And she's a woman? Grow up if you want people to take you seriously.

For one thing, I recently read this 630 page book from cover to cover, loved it, and can tell you that everything it says is literally the opposite of what she's proposing. So let's start there.

Basic Economics: Sowell, Thomas: 8601415789973: Amazon.com: Books

Basic Economics [Sowell, Thomas] on Amazon.com. *FREE* shipping on qualifying offers. Basic Economics

www.amazon.com

Also, the arrogance is thinking that because somebody is smart in one area, it automatically translates to other areas. I would probably fail a 10th grade chemistry test if you gave it to me today, or an 11th grade physics test, and my poems wouldn't get any snaps, and if I stepped into the professional sports arena I would get absolutely murdered no matter which sport it was. On the other hand, I work in finance, have a Master's in Accounting, grew up in a household with a CPA father who blathered on about this stuff my whole life, and just read that 630 page economics book. This stuff is, in fact, my area of expertise.

Also, throwing in the woman part is ridiculous. So women aren't allowed to be criticized if they have terrible ideas? There are plenty of women who don't believe what Michelle Wu is selling them.

 

[DZH22]

No, the analogy works fine. Risk can be (and is always) simply factored into overall project valuation. The only thing missing from my simple analogy is that there are limits of applicability (which @Brattle Loop speaks to above). Someone may choose to bend over to pick up $100, and yet may choose not to bend over to pick up 1-penny. But where in between does it start to matter? The point is that simply lowering the incentive from $100 to something else doesn't automatically mean everyone's going to ignore the opportunity. My analogy emphasizes how comical that notion is. For instance, if now the opportunities are at $100 but tomorrow they are at $99, does peoples' interest in pursuing the opportunity become zero. Of course not.

There is nothing wrong with discussing whether developers can or should contribute more. You are correct there's a tipping point, and correct that policymakers have probably made poor decisions in past examples. But the notion of asking whether we're demanding the right amount from developers is not an invalid notion in and of itself.

Actually, again, the analogy only works if first there is risk involved. For instance, if you have to pay $60 for the right to reach down for that $100, and you only get one shot at it, and it's windy, then there would be a risk. Maybe you practice beforehand and figure out you can grab it over 60% of the time, and thus should expect to make money with each attempt.

Then you lower the $100 to $75, so you are wagering $60 for the right to snag $75 off the ground. In that case, if you can't grab that money 80% of the time before it flies away in the wind, you would end up losing money in the proposition.

The developer has to put their own money on the table with the hopes of generating a profit down the road. A larger affordable housing requirement means that is a bite out of the expected profit. Then there are rising costs in labor, materials, possible court battles, and every other delay that developers need to go through to actually get a project built around here. At some point many will say that while they would probably still make a profit, it becomes less clear cut with every regulation added on top of what they're doing. If you go to the above, nobody is going to wager $60 for the chance to pick up $65. There is a point where it isn't worth it anymore. Developers risk a ton of their own money and that risk has to be part of any analogy for it to actually apply here.

 

[bigpicture7]

Actually, again, the analogy only works if first there is risk involved. For instance, if you have to pay $60 for the right to reach down for that $100, and you only get one shot at it, and it's windy, then there would be a risk. Maybe you practice beforehand and figure out you can grab it over 60% of the time, and thus should expect to make money with each attempt.

Then you lower the $100 to $75, so you are wagering $60 for the right to snag $75 off the ground. In that case, if you can't grab that money 80% of the time before it flies away in the wind, you would end up losing money in the proposition.

The developer has to put their own money on the table with the hopes of generating a profit down the road. A larger affordable housing requirement means that is a bite out of the expected profit. Then there are rising costs in labor, materials, possible court battles, and every other delay that developers need to go through to actually get a project built around here. At some point many will say that while they would probably still make a profit, it becomes less clear cut with every regulation added on top of what they're doing. If you go to the above, nobody is going to wager $60 for the chance to pick up $65. There is a point where it isn't worth it anymore. Developers risk a ton of their own money and that risk has to be part of any analogy for it to actually apply here.

So in your example, your hypothetical developer is right up against their risk limit and only takes on projects where they're skating on infinitesimally razor thin ice. MmmHmm.

No, sorry. Developers have probabilistically sound positive margin in real life. And therefore, it's fair game to ask if they'd still participate with a slightly smaller margin. But you are saying that if their probabilistic margin is reduced AT ALL, they'll all leave Boston and not develop here. I call BS on that big time. The analogy holds with some TBD threshold.

 

[Brattle Loop]

For one thing, I recently read this 630 page book from cover to cover, loved it, and can tell you that everything it says is literally the opposite of what she's proposing. So let's start there.

Citing (for a given definition of the term) an economics book by an economist who cannot accurately be described as widely considered an authority by the economics community (he's controversial, which is fine for a discipline as prone to uncertainty and argument as economics, but that does mean that what he says is not inherently correct simply because he wrote it down) is not much of an argument.

Also, the arrogance is thinking that because somebody is smart in one area, it automatically translates to other areas. I would probably fail a 10th grade chemistry test if you gave it to me today, or an 11th grade physics test, and my poems wouldn't get any snaps, and if I stepped into the professional sports arena I would get absolutely murdered no matter which sport it was. On the other hand, I work in finance, have a Master's in Accounting, grew up in a household with a CPA father who blathered on about this stuff my whole life, and just read that 630 page economics book. This stuff is, in fact, my area of expertise.

None of which in any way says anything about the relative benefits or costs of the mayor's policy proposal. It is arrogant to assume that the mayor is simply wrong without actual evidence to support that contention. I highly doubt that that economics book you linked to has a detailed projection or analysis of the costs and benefits resulting from the City of Boston increasing its affordable unit percentage from 13% to 20%. Such an analysis would effectively give us an idea of what the actual costs and benefits would likely be, which would then be useable to determine whether the policy in question is desirable. It's entirely plausible that the mayor's office or the BPDA or whoever is involved in these policy decisions analyzed the situation and determined that there would not be too much of a deterrent on development going from 13% to 20% and that the expected cost, therefore, to the city in order to achieve the desired policy good was acceptable. If they didn't do any of that and just proceeded blindly, that would be incredibly stupid (though politicians do do stupid things from time to time) and it would not be arrogant to simply dismiss her policy as wrong, but absent any evidence, it is arrogant to claim otherwise without actual evidence.

Also, throwing in the woman part is ridiculous. So women aren't allowed to be criticized if they have terrible ideas? There are plenty of women who don't believe what Michelle Wu is selling them.

In my initial read of the complained-about sentence in your post I read the "this woman" part as dismissive rather than necessarily sexist (I could easily see a similarly dismissive "this guy"), that said it skated pretty close to some very common sexist language deliberately used to be dismissive towards women. I don't assume that was your intent (that's generally my policy), but I do see how your initial comment could have been read in that way, which might explain the intensity of the reaction.

You are saying that if their margin is reduced AT ALL, they'll all leave Boston and not develop here. I call BS on that big time.

That's the problem I have with that part of the argument. Pretty basic economic theory says that there's a point where the costs are too high and the benefits too low to justify an investment/development, but there's precious little evidence presented here that this particular change would be the straw that breaks the camel's back. (I'm perfectly happy to accept the argument if there's data to back it up...but...)

 

[DZH22]

So in your example, your hypothetical developer is right up against their risk limit and only takes on projects where they're skating on infinitesimally razor thin ice. MmmHmm.

No, sorry. Developers have probabilistically sound positive margin in real life. And therefore, it's fair game to ask if they'd still participate with a slightly smaller margin. But you are saying that if their probabilistic margin is reduced AT ALL, they'll all leave Boston and not develop here. I call BS on that big time.

First of all, my example includes a risk and yours doesn't. You can argue that the level of risk is incorrect, but mine was already far more correct than yours because it's not just like finding free money by the side of the road.

Second of all, the assertion is that we will end up with less development. There may still be developers out there who figure out how to turn a profit, but that number will shrink as will the amount of developments built here under any new rules that increase costs on these projects. It's not an all or nothing proposition here. We will see less development than we should, and get less housing units (ie the opposite of what the proposals intended). I am confident of that last part, that there will be less affordable housing built than is expected from these policies, because less housing will be built overall.

The biggest issue is when the actual measurement of this can begin. Many projects are already approved and/or underway. I assume the housing will all be grandfathered under the terms of their earlier approvals, as will other buildings. There is a large backlog of that still waiting to be built. So it will take a few years before we can even start to see the damage (or non-damage in your estimation) that will be wrought with these policies. So any satisfaction on either of our parts about proving the other person wrong will have to wait until probably 2026/2027 at the absolute earliest. However, I have a long memory and I hope you do as well. Some time between 2028-2030 we can revisit these posts and see who was correct.

 

[bigpicture7]

First of all, my example includes a risk and yours doesn't. You can argue that the level of risk is incorrect, but mine was already far more correct than yours because it's not just like finding free money by the side of the road.

Second of all, the assertion is that we will end up with less development. There may still be developers out there who figure out how to turn a profit, but that number will shrink as will the amount of developments built here under any new rules that increase costs on these projects. It's not an all or nothing proposition here. We will see less development than we should, and get less housing units (ie the opposite of what the proposals intended). I am confident of that last part, that there will be less affordable housing built than is expected from these policies, because less housing will be built overall.

The biggest issue is when the actual measurement of this can begin. Many projects are already approved and/or underway. I assume the housing will all be grandfathered under the terms of their earlier approvals, as will other buildings. There is a large backlog of that still waiting to be built. So it will take a few years before we can even start to see the damage (or non-damage in your estimation) that will be wrought with these policies. So any satisfaction on either of our parts about proving the other person wrong will have to wait until probably 2026/2027 at the absolute earliest. However, I have a long memory and I hope you do as well. Some time between 2028-2030 we can revisit these posts and see who was correct.

You could raise all Boston developers' costs by $1 right now and there would be absolutely zero change in the city's development activity. You could raise it by $100,000 and you'd likely start to see a change in development activity. Where, precisely, meaningful change starts to occur is somewhere in between. That is the extent of my argument. I was never disagreeing with you that at some point development activity will start to reduce.

 

[DZH22]

You could raise all Boston developers' costs by $1 right now and there would be absolutely zero change in the city's development activity. You could raise it by $100,000 and you'd likely start to see a change in development activity. Where, precisely, meaningful change starts to occur is somewhere in between. That is the extent of my argument. I was never disagreeing with you that at some point development activity will start to reduce.

A 7% increase in the affordable housing component is going to cost developers well over $100,000 on the average project, so you're kind of making my point. Here I am trying to give you a nice out until we reconvene in 6-8 years, yet you just keep on going.

 

[bigpicture7]

A 7% increase in the affordable housing component is going to cost developers well over $100,000 on the average project, so you're kind of making my point. Here I am trying to give you a nice out until we reconvene in 6-8 years, yet you just keep on going.

You could raise all Boston developers' costs by $1 right now and there would be absolutely zero change in the city's development activity. You could raise it by $10,000,000 and you'd likely start to see a change in development activity. Where, precisely, meaningful change starts to occur is somewhere in between. That is the extent of my argument. I was never disagreeing with you that at some point development activity will start to reduce.

 

[TallIsGood]

Maybe we should stop reducing the size of many housing developments? More housing is better.

 

[stefal]

There will be a feasibility study completed in 150 days. No need to wait 8 years to see if the Mayor is right or if you are right. I'm sure they will consider economic risk.

The parking news is great. Affordable developments costs could be up to 30%+ cheaper now, just through simple policy. This is in addition to the parking maximum put in place back in October, which can save up to $50,000 per spot. I won't make any bets, but maybe they'd be leaving parking behind instead of leaving for Chicago or DC, which would realistically be more like Somerville, Revere, Chelsea, Everett, Medford, Waltham, etc. for the majority of developers if Boston became "impossible." Demand for talent that is uniquely here isn't leaving, and a lot of developers are local.

 

[Blackbird]

1. Cambridge recently went to at least a 20% affordable housing requirement in all new developments. Does anyone know roughly how many units have been built under this? I suspect very few.

By % increase in # of housing units, Cambridge built more than Boston between the 2010 and 2020 censuses (data). Kind of hard to say how many of those units were built before and after the 2017 change to require 20% affordability, though.

Edit: Per this report, there at least wasn't a slowdown in housing production in 2018, the year immediately following the 20% resolution.

From the public report linked above:

 

[SuffolkHeights11]

By % increase in # of housing units, Cambridge built more than Boston between the 2010 and 2020 censuses (data). Kind of hard to say how many of those units were built before and after the 2017 change to require 20% affordability, though.

Edit: Per this report, there at least wasn't a slowdown in housing production in 2018, the year immediately following the 20% resolution.

From the public report linked above:
View attachment 19879

Thank you for the numbers. If these percentages and linkage fees can pencil out economically I'm all for it and it's a win-win.

 

[bigpicture7]

Actions announced to increase affordable housing

Mayor Michelle Wu today announced a series of actions to increase affordable housing and stabilize communities, commissioning two feasibility studies to shape updates to Boston’s policies. First, a study of the existing Inclusionary Development Program requirements and market conditions will...

www.boston.gov

1. Cambridge recently went to at least a 20% affordable housing requirement in all new developments. Does anyone know roughly how many units have been built under this? I suspect very few.

Why do you "suspect very few"? I cannot recall a time of more vibrant housing development around Kendall square or East Camb., for instance. Either recently built (past ~4 years) or in the present developmental pipeline there are many thousands of units. Pardon the informality of this list:
-Expansion of Lofts in Kendall Square
-Flats on First (Kendall East development)
-Prism Apartments
-165 Main
-145 Broadway
-Proto on Ames
-The more recent Avalon shit near CX
-The big ugly residential building u/c in CX
-Multiple large residential buildings planned for Volpe
-Residential building planned to replace the above-ground garage at CambridgeSide

And I am sure I'm missing some. I am not saying this is "enough"...Cambridge needs much more. Simply pointing out that there's little visual evidence of a lack of housing construction.

Side Note - An interesting one to watch: the ~300ft tower at Broad Canal (51 Main) is sidelined as the developer contemplates how to incorporate housing. The city initially rejected it for lack of housing. So let's see if that developer comes back and agrees to include what the city is asking for.

 

[HenryAlan]

Building is a risk. There is no risk to picking up money off the sidewalk (unless you think *GERMS* or something). The person picking money off the sidewalk isn't putting millions of dollars on the line, or anything at all really.

I'd say nice try, but honestly it really wasn't. So... Try again?

Building is demonstrably not a risk, though. If you build it, people will rent the space. That's been clear in Boston for a very long time, now. So the issue becomes a question of profitability. Can a developer make a profit under these revised regulations? If yes, then they'll continue to build, if no, then they won't.

To take the money on the sidewalk scenario, add a time and effort element. You can see the $100, but it is partially buried, it will take you 30 minutes of work to get the money. Most people will trade 30 minutes of work for $100. Then replace it with a $5 bill, many people will decide it's not worth the time and effort. That's what the builders face -- does the extra regulation mean that they can no longer make enough money to justify effort that could be directed toward something else? I don't think we know the answer, but the cool thing about market economics, even when regulated, is that we will start to get data on this and begin to have a better understanding over time. Perhaps there is already data from Cambridge or other cities that can give us an indication of where we are on the continuum between Ben Franklin and Abraham Lincoln.

 

[JumboBuc]

Can we please move this whole discussion to another thread? The race is over, and there's a huge difference between policy and politics. (In my opinion, the fact that those two things are always conflated is a huge contributor to lots of the problems we face as a nation.)

There are plenty of other housing and affordability threads on this here website.

 

[jdrinboston]

-- does the extra regulation mean that they can no longer make enough money to justify effort that could be directed toward something else? I don't think we know the answer, but the cool thing about market economics, even when regulated, is that we will start to get data on this and begin to have a better understanding over time. Perhaps there is already data from Cambridge or other cities that can give us an indication of where we are on the continuum between Ben Franklin and Abraham Lincoln.

My only concern here would be if the 20% is instituted and it became obvious that a sizable number of developers were no longer interested in building in the city due to profitability concerns, would it be politically feasible to walk it back to 14 or15%? I'd be a bit concerned that a mayor looking to reduce the affordable housing set aside could to turn into a major political dustup. Obviously, we'll see where the feasibility study shakes out, but I'd feel much better starting at 15 or 16% and going from there.

 

[Brattle Loop]

My only concern here would be if the 20% is instituted and it became obvious that a sizable number of developers were no longer interested in building in the city due to profitability concerns, would it be politically feasible to walk it back to 14 or15%? I'd be a bit concerned that a mayor looking to reduce the affordable housing set aside could to turn into a major political dustup. Obviously, we'll see where the feasibility study shakes out, but I'd feel much better starting at 15 or 16% and going from there.

I feel like it would probably be doable, though if it's possible to do so a rollback, if needed, might be implemented as some kind of a variance or exception that's implicitly granted in most if not all cases rather than formally changing the official requirements. (I'm unfamiliar with the actual process, so I don't know if something quite so cynical is allowed, but it wouldn't surprise me.)